Cathay Pacific Airways and Singapore Airlines are spending US$207 million fitting flat-bed seats and larger television screens in business class. Finding passengers to fly them may be a challenge.

Sales at the front of the cabin fell short of expectations in December, Cathay Pacific said last week, as the Hong Kong-based carrier this month introduced promotional business-class fares. Qantas Airways, Australia's biggest, offered 28 per cent discounts on return premium tickets to Hong Kong during the holiday season.

Premium ticket prices between Asia and the US averaged US$5,859 in December, their lowest level since 2009, while in Australia an index of business-class ticket prices dropped 30 per cent from a year earlier to a record low.

Wall Street's cost cuts and dismissals, which have helped erase more than 300,000 financial-industry jobs in the past two years, are not over yet as Citigroup and Morgan Stanley announced a combined 12,600 job cuts in the past month.

"When financial institutions are firing people, traffic and profits at airlines like Cathay and Singapore Airlines are affected because they are known for serving premium passengers like bankers," said Li Lei, an aviation analyst at China Minzu Securities. "Their home bases are too reliant on financial services and trade."

Airlines that invested in entertainment systems, seats and lounges to compete for business traffic might see growth in business-class fares slowing further this year, according to American Express. New York-based AmEx said it would eliminate 5,400 jobs this year, mostly in travel services, as consumers and businesses rely more on digital technology for bookings.

"When revenues are light, one of the first things to happen is a cutback in travel," said Michael Werner, a banking analyst at Sanford C. Bernstein in Hong Kong. "You'd prefer to cut travel expenses before cutting headcount."

Bank of America's Merrill Lynch unit, UBS, JP Morgan Chase, and Royal Bank of Scotland Group all ordered staff to fly economy on short-haul routes during the global financial crisis in 2008.

That pressure was returning as companies try to rein in expenses, said Kelvin Lau, a Hong Kong-based transport analyst at Daiwa Securities.

"Many companies are trimming down their travel budgets," Lau said. "Even when there's good macro data, it doesn't mean they'll stop being cautious on their spending."

Airlines have invested heavily in the front of their cabins in recent years to capture valuable corporate accounts. While business class and first class take up less than 15 per cent of total seats on long-haul flights, they account for half of a flight's revenue because of the higher prices.

Singapore Air last year hired the design unit of BMW and James Park Associates, the interior designer of Mumbai's Taj Mahal Palace hotel, to revamp first-class and business-class offerings.

Last week, the carrier started introducing 193cm full-flat beds and larger television screens on 10 Boeing 777s at a cost of S$95 million (HK$600 million), according to a company statement. Cathay put on a laser show and hired Lady Gaga, Tina Turner and Marilyn Monroe lookalikes for the December 2010 unveiling of its HK$1 billion upgrade of business-class interiors on its Boeing 777s and Airbus SAS A330s. The carrier said last week it had 47 aircraft equipped with the new seats and the upgrade would be completed by March.

"The overall performance in the premium cabins was weaker than expected," James Tong, a general manager at the airline, said in a stock exchange filing last week. "Passenger demand held up in the economy cabin." Elin Wong, a company spokeswoman, declined to comment on premium-class occupancy.

Cathay said in August that it posted a loss of HK$935 million in the six months ended June and chief executive John Slosar told staff in November the carrier was facing a "very challenging year" in 2012.

Qantas spent A$270 million (HK$2.2 billion) upgrading the interiors of its 747-400s and 767s, as well as sprucing up lounges in Singapore and Hong Kong. It and prospective partner Emirates have also introduced a chauffeur service to take premium passengers to and from airports.

Wall Street banks pared bonuses and fired workers after the global financial crisis. Bank of America and HSBC had said they would cut 30,000 jobs, while UBS had said it would fire 10,000 workers.

Citigroup said last month it would eliminate 11,000 positions while Morgan Stanley was planning to cut 1,600 jobs from its investment bank and support staff.

This article appeared in the South China Morning Post print edition as Business class up in the air